Michelle recently spent time with a client in New Zealand who are thoughtfully preparing for possible housing market stress. There was a therapeutic value in stepping out of the cryptocurrency and blockchain obsessed ecosystem in Asia, taking a step back and remembering what’s really important in consumer lending — financial stability, fair lending, and the ability to look after our customers when they are in crisis.
As they walked through crisis forecasting, planning and mitigation, the group realized a number of important takeaways. Here are some of the key ones that stood out:
- You cannot work in isolation. The folks in collections need to be coordinating with those working on product design and customer service. The folks in operations need to be coordinating with those in financial and legal roles. Teamwork.
- Timing is critical. De-risk before the crisis, and run tests on your mitigation strategies well before one hits. That should place you in a good position to hit the gas and power out of a crisis.
- Listen to anecdotal evidence. Leading indicators are the holy grail of a crisis, but are few and far between. Customer confidence indices, truck miles traveled, inventories may all corroborate with the anecdotal evidence. Yes, talk to the shopkeeper and the taxi driver, and listen to them.
- Know the key drivers and run stress tests. Some mitigation tactics sound like a good idea but may have little impact. Look for the most material drivers and use them.
- Make a plan and stick to it. ‘Tinkering’ will not typically create considerable improvement. Set your line and drive.
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